Skip to content



Green Measures - several new measures introduced


Key measures

A number of renewable energy/low carbon measures have been introduced in the Pre-Budget Report, the key ones being the extension of the increased recoverable obligation certificates ('ROCs') for offshore wind projects until March 2014 and the reduction of the discount in climate change levy (CCL) for companies with climate change agreements (CCAs).

The Pre-Budget Report provides a further £400 million to support business investment in low-carbon growth and help households reduce energy costs. Combined with policies announced since September 2008, the Government estimates that this could support over £15 billion of additional public and private investment in the low-carbon and energy sectors over the next three years.

Who will it affect?

Corporates

  • Additional support for offshore wind projects accredited from April 2010 to March 2014 via the Renewables Obligation (more details below);
  • Increasing the reduced rate of climate change levy (CCL) for sectors in the climate change agreement (CCA) scheme from 20 to 35% across all taxable commodities (ie lowering the discount from 80 to 65%) enabling the CCA scheme to continue to operate within the EU framework for energy, and extending CCAs to the plastics and laundries sectors;
  • Doubling to four the UK's commitment to fund carbon capture and storage demonstration projects via contributions from electricity suppliers;
  • Establishing Infrastructure UK to leverage further investment in low-carbon projects including by: investing €100 million in a European Investment Bank-led fund to deploy up to €1.5 billion of equity and €5 billion of debt in low-carbon infrastructure (including the London Array offshore wind farm); and considering the case for a low-carbon investment institution;
  • £120 million for low-carbon industries in the UK, including £50 million to invest in the development of the UK offshore wind industry, which involves funding for new manufacturing and testing facilities (eg £15 million for the New and Renewable Energy Centre in Northumberland to develop a world-leading UK capability for the testing of wind turbine blades, enabling businesses in the supply chain to gain affordable access to testing facilities) and £40 million support for low-carbon technologies; and
  • Exempting electric cars from company car tax (CCT) for 5 years from 2010, extending CCT bandings in 2012, exempting electric vans from van benefit charge for 5 years and introducing a 100% first-year allowance for business expenditure on electric vans.

Individuals

  • Confirming that the income received by those who generate small-scale renewable electricity for their home through the clean energy cash-back scheme (ie feed in tariffs), worth on average £900 in 2010, will be tax free;
  • £200 million to improve energy efficiency and tackle fuel poverty by: offering £400 for up to 125,000 households to upgrade their old boilers to the latest efficient models with a greener boiler incentive; and providing extra resources for Warm Front to help 75,000 of the most vulnerable households with heating and insulation;
  • Helping one million more vulnerable households with discounts on their energy bills by increasing support provided by energy companies from £150 million to £300 million by 2013-14; and
  • Increasing support for low-carbon vehicles through exempting electric cars from company car tax from 2010, introducing a 100% first-year allowance for electric vans, and investing a further £30 million on low-carbon transport projects

Renewables Obligation for Offshore Wind

When first announced in April's Budget, the increase from 1.5 ROCs to 2.0 ROCs for every megawatt hour of energy from offshore wind farms applied only to projects reaching financial close in the financial year 2009-2010, falling back to 1.75 ROCs for projects reaching financial close in 2010-11. Today's announcement extends the entitlement to double ROCs for future projects accredited before March 2014 and is designed to support a target of 3 gigawatts of investment in offshore wind, thereby contributing to the achievement of the UK's renewable energy target.

Our view

There were a number of positive measures to encourage investment in renewable energy and low carbon infrastructure, with offshore wind being a key focus.

The extension of the window for the additional support available for offshore wind farms currently commencing construction, in particular, is a welcome boost for the offshore wind industry and provides project developers with a firmer basis with which to progress projects through the planning cycle.

In addition, the UK offshore wind industry will benefit from £50 million of funding including investment in new manufacturing and testing facilities, the benefit of which will be felt when the demand for turbines has increased following the anticipated economic recovery.

At the other end of the spectrum, there is an income tax exemption for individuals who generate small scale renewable power mainly for their own use. Today's announcement will ensure the feed-in tariffs they receive, worth on average £900 pounds a year, will not be subject to income tax.

Whilst the changes are welcome, they do add to the complexity of the various incentives available for renewable energy investment. We now have ROCs, regulation, feed in tariffs and tax exemptions, all of which make it harder for investors to understand and take advantage of these. In addition, in contrast to the many positive measures introduced, the increased rate of CCL for sectors in the CCA scheme from 20 to 35% across all taxable commodities was unexpected by many and is expected to raise an additional £50 million per year. This will particularly affect large emitters, eg the steel industry for whom the benefits of CCAs can be significant.